Fri, Mar 12, 2010
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Lessons Learned About Mortgage Companies
| | Friday, March 26, 2004 @ 08:00 AM EST
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Contributed by: mbaker2219
mbaker2219 Properties
Read more archived articles about Law and Legal Issues
Over the years I have learned that almost all investors want mortgages that will give them loans that include dollars for rehabilitation and renovation of investment properties.
There are many investor programs offered by thousands of mortgage companies. Some Mortgage Companies have programs that will loan funds as part of the loan package money for rehab and renovation. Some have programs where they set up escrows for rehabilitation and renovations
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and have inspections on the work in process in order to get the next draw.
Due to the vast number of rules and with lenders all having different policies we are now adding disclosures in all of our real estate purchase agreements and related forms to assure buyers are using lenders that have programs that work for borrower (buyer), seller, realtor, wholesaler and lender.
We now use the following disclosure language in our purchase agreements, addendums, assignments, and buyer broker agreements:
Lender and Title Company Restrictions. The buyer (s) and seller (s) agree that buyer (s) will disclose to buyer’s lender all relevant considerations regarding the purchase of this property. Due to the nature of this transaction, buyer (s) will only use a lender that allows buyer to receive funds from the seller to cover allowable closing costs, permissible allowances and expenses of rehabilitation and renovation. This purchase agreement is void if buyers (s) and/or their choice of lender knowingly violate state or federal laws that govern this transaction. If found in violation of applicable law, buyer agrees to forfeit their good faith deposit.
Title Insurance Companies, as part of the services they perform, carry out the terms and conditions of the purchase agreement and any other relevant sales documents. They make sure that the purchase agreement and other documents you use in your real estate transactions are complying with what the lender, Title Insurance Company, and laws ask you to do. They review and check to make sure they put all charges on the HUD statement so the lender can see all expenses that are being paid at the closing. For example, the following should appear in the closing statements: commissions, rehabilitation and renovation escrows, builders allowance, wholesaler’s fees, and assignment fees.
If the Title Insurance Company does not place an expense on the HUD or other closing documents, ask them to amend their closing statements. If they cannot do so and/or if the closing must proceed as scheduled, then make sure all parties to the transactions sign off and are advised of the changes. It goes without saying the mortgage company must be advised of the omissions by the Title Insurance Company.
Next week I will discuss the question of lenders who require substantial cross collateralization as part of the loan process.
Note: For more info, please see my profile.
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